Chief Executive Officer of Customs, in the matter of Omeo Way Pty Ltd ACN 050 415 355 v Omeo Way Pty Ltd ACN 050 415 355 [2008] FCA 1152

FEDERAL COURT OF AUSTRALIA

Chief Executive Officer of Customs, in the matter of Omeo Way Pty Ltd ACN 050 415 355 v Omeo Way Pty Ltd ACN 050 415 355 [2008] FCA 1152

IN THE MATTER OF OMEO WAY PTY LTD ACN 050 415 355 THE CHIEF EXECUTIVE OFFICER OF CUSTOMS v OMEO WAY PTY LTD ACN 050 415 355

QUD 144 OF 2008

DOWSETT J

10 JULY 2008

BRISBANE IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY QUD 144 OF 2008

IN THE MATTER OF OMEO WAY PTY LTD ACN 050 415 355 BETWEEN: THE CHIEF EXECUTIVE OFFICER OF CUSTOMS

Plaintiff

AND: OMEO WAY PTY LTD ACN 050 415 355

Defendant

JUDGE: DOWSETT J

DATE: 10 JULY 2008

PLACE: BRISBANE

REASONS FOR JUDGMENT 1 This is an application by the Chief Executive Officer of Customs (the "CEO") to wind up Omeo Way Pty Ltd in insolvency. The application is based upon Omeo's failure to comply with a statutory demand. The debt is an amount owing by Omeo to the CEO as a result of costs orders made in litigation between Omeo, another company, Granite Arms Pty Ltd, and the CEO. 2 Those proceedings, as I understand them, arose out of the confiscation of a large number of hand guns which had been in the possession of Omeo. Omeo was successful in this Court but failed in the High Court. As a result of those proceedings, it incurred the costs to which I have referred. The proceedings always involved the CEO, Omeo and Granite Arms. It is not entirely clear to me that the CEO should have been sued in that name rather than in the name of the person holding the office at the relevant time. It is a common practice in this Court for officials to be sued in the names of their offices, but authority for taking that course is rarely cited. 3 In any event, that course was adopted in this case. Nobody has complained about it. As a result, the order for costs was in favour of the CEO, the statutory demand was issued in the name of the CEO, and these current proceedings have been taken in the name of the CEO. In view of the fact that all of these steps stem from Omeo having commenced proceedings against the CEO under that name, it is understandable that this should have occurred. I remain concerned that there may be no authority for the course which has been followed, but it does not matter for present purposes. This is because, pursuant to s 459S of the Corporations Act 2001 (Cth), the point ought to have been taken in proceedings to challenge the validity of the statutory demand and cannot now be taken without leave. No application for leave has been made. Indeed, Mr Owen, to whom I have given leave to appear on behalf of Omeo, has indicated that he does not wish to take any such point. In view of the fact that the situation has been created by Omeo's own actions so long ago, that is an appropriate course. I therefore say no more about that aspect of the case. 4 There is no doubt that Omeo has failed to comply with the statutory demand. It seems that it has no substantial asset other than a claim presently outstanding against the State of Queensland, arising out of the gun buy-back programme. This case has been set down for trial in the Supreme Court, commencing in early August. It cannot be said that the case is entirely without merit. A number of attempts to set aside the proceedings have failed. I proceed upon the basis that there is an arguable case. Mr Owen seeks an adjournment of these proceedings to enable Omeo to pursue those proceedings in the Supreme Court. He informs me, and it seems not to be disputed, that the Commonwealth has given some form of indemnity to the State of Queensland in connection with those proceedings. He argues, correctly, that as the CEO is the only creditor of Omeo, other than Mr Owen himself, there is a possibility that if a winding up order is made, any liquidator may not feel inclined to pursue the action since it would be to the disadvantage of the Commonwealth to enforce the proceedings. I say that the submission has merit, not because I think that a liquidator might be inclined to act other than in accordance with his or her duty, but rather to recognise the fact that the Commonwealth could be said to have an interest in stopping the proceedings in the Supreme Court. 5 It used to be said that a petitioning creditor who demonstrates insolvency is entitled ex debito justitiae to a winding up order. It seems now to be accepted that there are circumstances in which an order may be refused notwithstanding non-compliance with a statutory demand. The circumstances are fairly limited. For present purposes, the following statement by Gibbs J (as his Honour then was) in IOC Australia Pty Ltd v Mobil Oil Australia Ltd (1975) 49 ALJR 176 at 181-182 is apposite. I note that Stephen and Jacobs JJ agreed with his Honour's remarks. His Honour said: Then it was submitted that Mobil's dominant motive in prosecuting the petition was to force the appellant out of business; it was also said that the appellant is an independent Australian-owned oil company whose activities have earned it the hostility of larger, international oil companies, and that the evidence showed that Mobil's treatment of the appellant was increasingly harsh and unfair and that there had been a conspiracy between Mobil and other oil companies to harm the appellant. As some evidence of this alleged conspiracy, the managing director of the appellant deposed that all the oil companies in Australia had refused to refine the appellant's allocation of crude or purchase the oil from the appellant; this evidence was uncontradicted, but the circumstances under which the refusal occurred did not appear, and the allegation is in itself, neutral. It was conceded on behalf of the appellant that the evidence that Mobil was party to a conspiracy was "light" - in truth, there was no evidence on which a finding that Mobil engaged in a conspiracy could be supported. Nor is there any evidence that Mobil's decision to seek a winding up order against the appellant was actuated by any motive other than a desire to avail itself of one of the remedies open to a creditor of a company which cannot pay its debts; if it be surmised that Mobil was pleased at the prospect that the appellant might have to cease business, that is immaterial, for it is not the law that only a creditor who feels goodwill towards his debtor is entitled to a winding up order. Similarly, the question of whether Mobil's treatment of the appellant was harsh or grievous is not material. The authorities show that as a general rule a creditor who cannot obtain payment is, as between himself and the company that owes the debt, entitled to a winding up order as a matter of right … . 6 I accept that the statement as to entitlement to an order should not be understood as excluding the possibility that the Court might exercise its discretion against proceeding in that way. However the passage itself suggests that the circumstances presently relied upon by Omeo are not such as to lead to the exercise of the discretion. There is no evidence to suggest that the CEO is motivated in bringing these proceedings by a desire to terminate proceedings in the Supreme Court. It is a possible explanation, and Mr Owen urges that such an inference should be drawn, but in the end, the position seems to me to be no different from that which obtained in the IOC case. 7 No doubt the CEO will not be unhappy should the proceedings be discontinued. That, of itself, is not sufficient to deprive him of the right to invoke the winding up jurisdiction. I should say, too, that a liquidator would be obliged, in deciding to discontinue, to have regard to the rights of the company and its shareholders, should there be a substantial prospect of success in the action. I see no reason to suspect that any liquidator would act other than in accordance with his or her duty. In those circumstances I decline the application for an adjournment. 8 I order that: (1) Omeo Way Pty Ltd ACN 050 415 355 be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth). (2) Morgan Gerard Lane and Rajendra Kumar Kajtri be appointed joint and several liquidators for the purposes of the said winding up. (3) I declare that anything which is required or authorized by the Act to be done by the liquidator is to be done by either of them. (4) The plaintiff's costs of the application be reimbursed as a priority out of the funds in the liquidation. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.